Alan Kohler is one of Australia’s most experienced business commentators. Alan has been a trusted source of investment advice to Australians for many years, and in 2005 he founded Eureka Report - Australia’s #1 online investment report. Along with Robert Gottliebsen and Stephen Bartholomeusz, Alan also founded Business Spectator, the popular business news and commentary website. Alan is the regular finance presenter on the ABC News and producer of the popular nightly graph (or two).

Tassie spirit by the barrel

Young Bill and Lyn Lark decided to revive a long gone industry, and here’s how it happened...

Back in 1992, while fly fishing in the Tasmanian highlands, Bill, locally-living dad and his father-in-law, Max, took a break from casting at the disinterested trout and sat on the bank of the Clyde River, among the barley fields. Max pulled out a bottle of their favourite scotch and they had a chat about what makes for a good whisky. They’d had this conversation many times before but this time it triggered something in Bill.

That’s how he came to ponder a life-changing question: ‘Why isn’t anyone making whisky in Tasmania?’ After all everything you need isn’t just available there – it’s arguably the best.

No trout that day for Bill but he brought home the idea that he and his wife, Lyn, should rebirth an industry that had lain dormant in the state for more than 150 years.

Soon after, they found a five litre whisky still in an auction room and snapped it up. Wanting to do things by the book, Bill went to the Tasmanian government asking that the strict laws be loosened to let him start a distilling whisky at home. Bill, who is a bit of a charmer, got the MPs to change the rules without a fuss and so it was that the first licensed whisky distillery in Tasmania since 1839 started in their house – Lark Distillery.

Bill and Lyn were by no means whisky experts at the time. It was a classic case of ‘why not give it a go?’ There was no thinking that this little project would become a multi-million dollar business with investors, customers in several countries and an impressive trophy cabinet full of awards from all over the world, including the UK.

In the early days the banks didn’t get behind the idea of Tasmanian whisky, so Bill was still working as a land surveyor while Lyn did most of the distilling. They both learned as they went, taking advice from experts and going on more than one fact finding mission to Scotland. After a while they took some of their whisky to the annual Deloraine craft market and the response from the locals was the spur they needed to upgrade.

The pair went from the 5 litre still to a 20 litre, then 80 litre, then 500 litre operation. By the time Kristy, their oldest child, was a teenager the 500 litre whisky still sat directly outside her bedroom door. Kristy remembers the pleasant smell wafting under her door as she went to sleep.

It’d be nice to say Kristy always wanted to be in the business but growing up she actually wanted to be an air-traffic controller. In fact, she was accepted into an exclusive course after finishing school but decided to first go on a gap year to Scotland. By the time she came home the seed was planted and she wanted to work in the family business instead of aviation.

She started in the cellar door, then as apprentice whisky distiller, then head distiller, then general manager from 2009-2010. She knows every corner of the business.

Kristy’s now 33 and in charge of the company’s ‘barrel investments’ – a stroke of innovation that kept the business afloat, with a healthy cash flow, when the banks wouldn’t back it.

Whisky needs time to mature – five years to be precise. And so what you can do is buy a 100 litre barrel from them for $3685, including GST, and they’ll store it for you for five years then buy it back for $4922.

“We were a new project to the banks and they decided not to help fund our growth so we decided to use this Scottish model,” Kristy says. In Scotland, she adds, it’s something distilleries have been doing for ages.

And, she assures, the risks are minimal. “The insurance covers that if anything happens to the distillery… say a fire or something, you’d still get your money back. And if the distillery went bust – which it’s not going to considering we’re doing so well at the moment – then you would actually have a 100 litre barrel of whisky that you could keep or sell.”

So the clever scheme is effectively a way of buying fixed interest shares in the company. With one barrel the interest rate is 5.96 per cent and with three it’s 6.45 per cent. Not bad at all. Of course, it's not the security of a bank term deposit, or the capital growth potential of Telstra shares (dividend yield 5.8 per cent) but there are worse fixed interest investments around. Kristy says it’s been a popular program and plenty of people invest in back-to-back barrels (rolling them over if you will). There’s also the comfort of knowing that if anything did happen to the business, you could throw a solid party with the 100 litres of premium single malt whisky turning up on your doorstep.

In this way, with the help of the Tassie faithful, the Lark family business grew. But as you can imagine a fast-growing whisky distillery isn’t the best place in the world to raise three kids and so the growth forced the family to move its operation. Since the first relocation they’ve moved twice more – first to Davey Street in downtown Hobart, where you’ll find the cellar door, and then in 2006 to a purpose-built facility at Mount Pleasant.

I wandered into the cellar door while in Hobart recently and, like everyone else there, was given a taste of the range while being told about the barley from Cascade Brewery, the water from the highlands and, most importantly, the peat bogs where the flavour comes from. The couple next to me were hopping into some cheese from Bruny Island too. It was a full-on show of Tasmanian produce and hospitality.

But at 21 years old the business isn’t fully family-owned anymore. In June the Lark family sold just over 75 per cent to outside investors. The sale brought in somewhere between $1 million and $5 million (they declined to be more specific and wouldn’t say who the investors are) and now Bill, Lyn and Kristy hold almost 25 per cent between them.

“Given that mum and dad will be turning 60 next year, they’re both looking to retire or at least cut back on work,” Kristy says. “They wanted to bring in people that had more experience developing larger businesses.”

Kristy will stay on but will now be working under new general manager John Rochfort and a newly elected board, including former Woolworths director Leon L’Huillier as chairman.

Ideally the business would have gone to Kristy, but she now lives in New South Wales with her husband, Joe, and their two-year-old son, Lachlan, and Joe’s work including the possibility of regular moves. Her two younger brothers aren’t in a position to take over either. David is 29 and makes a living as a builder, and Jack is 16 and more interested in food than drink – he came second in the first season of Junior Masterchef. One day, Bill and Lyn’s shares will be split between them.

So Lark Distillery may not be a fully family owned-business anymore but the family certainly doesn’t seem too sad about it. After all they’re still working in the business they love… just with a bit more money in their pockets. And isn’t that the whole idea?